Authorized in 2006 by the State legislature, Minnesota’s Performance-Based Incentive Program funds nursing home–initiated quality improvement projects for 1 to 3 years through increases of up to 5 percent in the operating per diem rate charged to Medicaid and private-pay residents. Funding decisions are made through a competitive bidding process administered annually by the Department of Human Services, with recommendations from a review committee. Program staff provide support to nursing homes during and after the application process. Nursing homes that do not achieve project-specific performance targets can lose up to 20 percent of the incentive payments. The program has engaged a high proportion of Minnesota nursing homes in quality improvement activities; meaningfully improved the quality of nursing home care; and had a positive impact on quality improvement processes, teamwork, and communication within nursing homes.